New orders drive record surge in UK manufacturing in May: PMI

LONDON (Reuters) – A deluge of new orders helped to drive a record increase in British manufacturing activity last month as the economy began to recover from the COVID-19 pandemic, a survey showed on Tuesday.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rose to 65.6 in May from 60.9 in April. While a little lower than the preliminary “flash” reading of 66.1, it still marked the highest since the survey started in 1992.

The index levels represent the pace and breadth of growth rather than the amount of output, however, and the sector likely has some way to go to get back to where it was before the lockdown.

The survey’s gauges of growth in new orders and employment also hit record highs, although so too did the measure of input cost inflation paid by factories for goods as they cited poor harvests, port disruption and Brexit.

Price pressures are on the radar of the Bank of England, though the central bank has said it is likely to look through price rises caused by short-term disruptions.

The BoE said last month that the world’s fifth-biggest economy was on course to grow by 7.25% in 2021, its fastest since World War Two, after a near 10% contraction last year.

Tuesday’s survey showed that export orders increased at the fastest rate on record, although survey compiler IHS Markit said this was driven mainly by larger companies, with smaller manufacturers seeing less demand.

PMIs for the services and construction sectors are due on Wednesday and Thursday.

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